Am geekily blogging the Carnegie Mellon transmission and distribution conference today … this morning saw one fascinating presentation from Kurt Yeager, CEO of EPRI, titled “A Bold Visions for Transmission and Distribution”.
Yeager starts from the point that we are experiencing fundamental transformation and disruptive change, especially technological change. Yet the pace of that transformation has been slow in the electric power industry relative to others parts of the economy. Ironic, isn’t it, since electric power is the primary enabler of all of the exciting, dynamic change that we experience!
Why is that? Yeager hypothesizes that institutions involved in the industry (I would say primarily regulatory agencies and regulated utilities) view change as a threat instead of as an opportunity. Yeager hit the nail on the head when he said that the mental challenge is overcoming that status quo bias.
The electric power industry is moving from its traditional role of keeping the lights on (reliability) to powering a networked digital economy. Right now we are in the process of the transformation that is crucial to that evolution. Indeed, Yeager says that we are at a fork in the road: the industry can go toward transformation or decay. If the industry does not transform, then it will become the provider of last resort and nothing else.
Or, to put it in my own words, the electric power industry has to evolve toward a customer value-focused business model, where the value proposition is seen as providing electric power services to end customers. The old model of utilities making more profit by increasing load and selling more power is obsolete, and the regulatory environment should allow that old, tired model to wither.
Yeager then went on to make some big-picture recommendations for how to transform and not decay. From his presentation, transformation requires:
The move to digital control of the power system, away from analog.
The integration electricity and communications.
Transformation of the meter into a two-way consumer services gateway.
Integration of distributed resources.
Acceleration of end-use efficiency.
Enabling a robust advanced generation portfolio.
He also highlighted an important mental and cultural change that I think is crucial to the transformation of the electric power industry: stop trying to maintain the legacy façade of low cost, instead think in terms of delivering value to customers.
All in all, a very stimulating presentation.